Is Mouwasat Medical Services (TADAWUL:4002) A Future Multi-bagger?

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Mouwasat Medical Services' (TADAWUL:4002) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Mouwasat Medical Services, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.19 = ر.س567m ÷ (ر.س3.6b - ر.س582m) (Based on the trailing twelve months to September 2020).

Thus, Mouwasat Medical Services has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 7.2% generated by the Healthcare industry.

View our latest analysis for Mouwasat Medical Services

Above you can see how the current ROCE for Mouwasat Medical Services compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Mouwasat Medical Services here for free.

What Does the ROCE Trend For Mouwasat Medical Services Tell Us?

We like the trends that we're seeing from Mouwasat Medical Services. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. Basically the business is earning more per dollar of capital invested and in addition to that, 107% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Mouwasat Medical Services' ROCE

To sum it up, Mouwasat Medical Services has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 202% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

While Mouwasat Medical Services looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 4002 is currently trading for a fair price.

While Mouwasat Medical Services isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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